“Although we often stress the importance of diversity in client portfolios, our industry is one of the least diverse industries in the United States,” Taylor Mavrakos said at the outset of her presentation at the Broadridge Fi360 Solutions Annual Conference.
While flashing a slide that said the same, Mavrakos, Business Development Manager and Financial Adviser with Florida-based MFP Financial Services, asked attendees why, if diversification is crucial to risk reduction, they didn’t practice it in their own business and the employees they hire.
A flurry of statistics followed, illustrating why diversification of an advisory business by age, gender, and race is so important.
Current financial advisor demographics find that 85% are men, and the average financial advisor age is 55, with JD Power noting approximately 20% are over the age of 65. Men account for 77% of CFPs, and 83% of CFPs are white.
Gender
Conversely, 15% of financial advisors are women, 23% of CFPs are women, and only 12% of Barron’s Top 100 Advisors are women. However, the number of female CFPs grew by 4.2% from 202 to 2021.
There is an estimated $11.2 trillion of investable assets controlled by women, or 39% of investable assets in the United States. It’s projected that by 2030, American women will be the primary investment decision-makers for two-thirds of the nation’s wealth.
Race
From 2020 to 2021, racial diversity among financial planners improved but remains predominantly white males. The number of black financial planners grew by more than 10% from 2020, while Hispanic CFPs grew by 15%.
“The growth rate is something to be mindful of,” Mavrakos said. “We’re becoming more diverse as we move along.”
Age
Only 5.5% of CFPs are under the age of 30, and 22.6% are between the ages of 30 and 39.
“Why should you care?” she rhetorically asked. “Having younger financial advisors that can relate better to younger clients will be crucial in upcoming years a around $68 trillion from Baby Boomers to Gen X and Millennials.”
That “Great Wealth Transfer” and the wealth growth rates will yield a more diverse client base.
Noting that the word “diversity” is more complex and inclusive, she said it could mean:
- Religion
- Culture
- Sexual orientation
- Language
- Educational backgrounds
- Skills and abilities
Diversity in the workplace specifically provides:
- Different perspectives
- Increased talent pool
- Better vendor relationships
- Stronger cultures of teamwork
- Connections to the communities you serve
So how does an advisor go about creating a diverse workplace? Mavrakos said to highlight the importance of diversity to the firm on its website, conduct diversity training, provide internships and scholarships to those in underrepresented groups and provide unconscious bias training for recruiters.
She also said to incorporate diversity into company policies and practices, celebrate differences, create an “inclusion council,” and promote diversity at high levels.
“It is in the industry’s best interest to adapt to the changing landscape of the clientele,” she concluded. “To attract assets, representation of the new controllers of wealth will be vital to success. A shift in mindset from quantitative to qualitative to attract a more diverse base will be needed. Additionally, firms should stress the importance of recruiting and promoting a diverse talent pool.”